Crypto under PMLA: Industry gives thumbs up, expects higher investor faith- QHN

The Centre’s decision to bring virtual digital assets (VDAs) under the Prevention of Money Laundering Act (PMLA) will improve investors’ confidence by bringing in more transparency, officials from several crypto firms told Business Standard.

On Tuesday, the Centre issued a notification to bring VDAs under the ambit of anti-money laundering law in India. The definition of “virtual assets” would include cryptocurrencies and non-fungible tokens (NFTs).

“This move not only helps safeguard the financial system’s integrity but also inspires investor confidence in the crypto industry,” said Edul Patel, chief executive officer (CEO) and co-founder of crypto firm Mudrex.

“This will strengthen our collective efforts to prevent VDAs from being misused by bad actors,” Ashish Singhal, co-founder of crypto exchange CoinSwitch, tweeted.

According to the notification, the exchange between virtual digital assets and fiat currencies, the exchange between one or more forms of virtual digital assets and the transfer of digital assets will be covered under anti-money laundering law.

Resultingly, any financial wrongdoing involving cryptocurrency assets can now be investigated by the Enforcement Directorate (ED). The Financial Intelligence Unit – India (FIU-IND), under the Department of Revenue, Ministry of Finance, will be responsible for receiving, processing, analysing, and disseminating the information relating to suspect financial transactions.

Also read: Cryptocurrency under PMLA: What changes for those investing in VDAs now?

“This move will enhance the legitimacy of the crypto industry in the eyes of the public,” said Punit Agarwal, founder of KoinX.

“This will not only promote transparency but also aid in identifying and curbing the activities of bad actors within the industry,” he added.

The VDA providers will now have to act as “reporting entities”. Under the PMLA, they will have to maintain the KYC details of their clients and other beneficiaries.

“Slowly but surely, we are moving towards a regulated crypto ecosystem. Entities such as CoinDCX are now required by law to conduct due diligence and enhanced due diligence under the PMLA,” said Sumit Gupta, co-founder and CEO at crypto exchange CoinDCX.

After the enactment of the law, crypto companies and VDA exchanges will be required to perform due diligence and report suspicious transactions to the Centre. As there are no regulators for the crypto industry in India, they will most likely be in direct touch with ED and FIU.

“The extension of PMLA will also give the government more power to keep track of crypto transfers outside of India,” said Dileep Seinberg, founder and CEO of crypto neobank MuffinPay.

“We have been looking for a way to share data with the FIU-IND for some time now, and are now delighted that this channel has been opened,” Gupta added.

According to Rajagopal Menon, vice president at another crypto exchange WazirX, this is the first of many steps towards regulations.

“We welcome the new notification regarding anti-money laundering (AML) reporting to FIU for crypto assets,” he said.

This is among the many steps the Centre is taking to regulate the crypto sector. Last year, it imposed a 30 per cent tax on the transfer of VDAs and an additional 1 per cent tax deducted at source (TDS).

Business Standard also reported earlier this month that India had asked the International Monetary Fund (IMF) and the Financial Stability Board to come up with a technical paper on the macroeconomic and regulatory perspectives of digital assets.

This paper will help in the formulation of a coordinated and comprehensive policy approach to cryptocurrency assets. The joint paper is expected to come out in October.

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